Indian economic system to recuperate at quicker tempo: Finance Ministry

Tribune News Service

New Delhi, November 4

India stands poised to recover at a fast pace and reach pre-Covid levels by the end of the year, barring a second wave that may be triggered by the fatigue with social distancing, says the Finance Ministry’s report for the month of October.

It felt the steady contraction of active Covid cases and a low case fatality rate has instilled measured optimism that the worst is behind us. At the same time, a second wave of the pandemic in advanced nations is a grim reminder of how reality hits back when caution is compromised.

The sustained surge of activity levels in India is a reflection of a relatively more manageable pandemic situation in the country as compared to advanced nations.

Movement of high frequency indicators in October point towards broad based resurgence of economic activity, notably in  healthy Kharif output, power consumption, rail freight, auto sales, vehicle registrations, highway toll collections, e-way bills, rebound in GST collections and record digital transactions.

Rural consumption has stayed strong, in part helped by sustained MSP procurement of food grains while the Manufacturing Purchasing Managers’ Index rose from 56.8 in September to 58.9 in October, pointing to the strongest improvement in the health of the sector in over a decade.

Prospects of economic normalisation are evident in the external sector indicators with consumption of petroleum products increasing in September and exports rebounding strongly with a year-on-year positive growth for the first time in the last seven months.

October witnessed some moderation in exports growth, primarily driven by weak oil exports. The expected current account surplus during the year is likely to provide a cushion to increased spending in the economy, it said.

Global investors continue to be upbeat about India’s economic prospects as gross FDI inflows crossed $ 35 billion during April-August, the highest-ever for the first five months of a fiscal year.

Food prices have been under pressure but are likely to smoothen out with prospects of a good kharif harvest and reduced supply-side disruptions in inter-state movement of food products.

Given that there are indications of India’s GDP growth in the current year being higher than currently projected, fiscal space is set to widen to accommodate other priorities of the government. This is evident in the GST collections crossing Rs 1 lakh crore in October – the first time since February.

“Given the trends, a continuous improvement in consumption and business sentiment augurs the hope of a strong economic rebound. This is also corroborated by IMF’s October 2020 projection of 8.8 per cent real GDP growth of India in fiscal 21-22,” noted the Ministry.

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